7 questions to ask yourself before taking out a student loan

Consider factors like your expected salary and eligibility for need-based aid before you borrow.

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Borrowing smart can lower your student debt load and free up funds in your post-college future. Before you take out student loans, ask yourself these questions to make sure you aren’t over-borrowing.

1. What’s my financial aid package?

Your financial aid package tells you how much your school will cover and how much you and your family are expected to pay. This includes any scholarships and grants your school automatically considers all students for, as well as work-study.

Your financial aid package also tells you how much you might need to take out in student loans. While it’s a good starting point, you aren’t necessarily stuck with this amount if you apply for outside funding sources.

2. Do I qualify for financial need?

Whether you qualify for financial need can affect you in two ways. First, it dictates how much you and your family are expected to pay. And second, it can impact your eligibility for in-school grants, which typically require you to qualify for financial need.

Not all schools use the same formula to determine your eligibility for need-based aid. Some rely on the Free Application for Federal Student Aid (FAFSA) formula. Others rely on the College Scholarship Service (CSS) Profile formula. You might even find a school that has its own way of calculating need.

If you’re still deciding between schools, pay attention to your financial need status. Going to a school that allows you to qualify for more need could open you up to more financial aid opportunities.

3. Have I applied for scholarships and grants?

While your school might automatically consider you for some scholarships and grants, many offer additional funding that requires an application. You might have to write an essay, participate in extra projects or complete community service. But it could shave thousands of dollars off your student debt load. — some scholarships even offer full tuition.

An ISA could be a good choice for someone in a traditionally high-paying field like engineering or medicine who plans on working a low-income job after graduation — like going into public service. That’s because the income percentage and length of your ISA often depend on your major and earning potential. Through this system, high earners could end up paying more than their tuition was originally worth. And those in traditionally low-paying fields like the arts could end up forking over a large percentage of their salary each month over a longer period of time.

5. What’s my expected starting salary after graduation?

Borrowing for school is like an investment. Many schools publish the average starting salaries of recent graduates — and some even break out these stats by major. While what you make when you graduate depends on your personal situation, it can give you a ballpark idea of how much you’ll be able to afford to repay each month.

Take this into account before you borrow, especially if you’re considering private student loans. Many private lenders offer loan terms from five to 20 years, though some may even go as high as 25 years. A longer term gives you lower monthly repayments, which you might need if your starting salary is low compared to your debt load.

6. How much do I really need to borrow?

You can typically borrow up to your school’s estimated cost of attendance. But this number often includes expenses beyond tuition and fees, like textbooks, transportation and other personal costs.

You might not actually need to borrow this much if your family can help you out a bit. Even if they can’t, finding a part-time job outside of work-study might earn you enough to cover pocket money and textbooks. You might not want to borrow the maximum amount unless a student loan refund is the only way you can support yourself.

7. What types of federal loans am I eligible for?

Federal loans are generally the best deal out there because some options are subsidized by the government. But they come with limits to how much you can borrow per loan type.

If you’re only eligible for a Graduate or Parent PLUS Loan and have good credit or a cosigner who does, you might actually be able to get a better deal with a private lender. Consider prequalifying with a few to find out what rates and terms are available to you.

Bottom line

Student loans might seem inevitable, but you could reduce or even totally eliminate how much you need to borrow by considering other options first. If you need to borrow, look into all of your options to make sure you’re getting the best deal available to you.

Frequently asked questions

You might qualify for student loan forgiveness depending on your career, the type of student loans you have and how much you borrowed. If you go into public service, you could be eligible for forgiveness on your federal loans after making 10 years of on-time repayments while working at an eligible job.

There are also several federal and private loan repayment assistance programs (LRAPs) that forgive fixed amounts of student debt. Typically, you’re required to work a certain number of hours at an eligible job to qualify. Teachers, lawyers, healthcare professionals and members of the military often have the most options when it comes to LRAPs.

Yes, you can be denied if you don’t meet the eligibility requirements for federal loans. For example, international students on a student visa are ineligible because they aren’t US citizens or permanent residents.

You can also lose your federal loan eligibility if your don’t maintain a 2.0 GPA or C average, drop below half time or go to prison. In some cases, you might be able to regain your eligibility, however.

Anna Serio is a staff writer untangling everything you need to know about personal loans, including student, car and business loans. She spent five years living in Beirut, where she was a news editor for The Daily Star and hung out with a lot of cats. She loves to eat, travel and save money.

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